Trumpeting Good News at a Bad-News Moment

November 1, 1997

Timothy Kelley

On a recent Tuesday, events seemed to be overtaking the magazine we were rushing into print. I was editing the interview with Paul Ellwood Jr., M.D., and its keynote was optimism. The inventor of the term "HMO" had told me he was newly hopeful about viable quality comparisons among health plans — and thus about the "managed competition" model he and Stanford University economist Alain Enthoven had envisioned for a new health care system. The triumph of optimism in the once-despondent makes great copy — especially near Thanksgiving. So why was the sky so inconsiderately falling on Wall Street?

I confess I haven't the financial smarts fully to comprehend how a company worth X on Friday can be worth less than half of X on the following Monday — without any major fires, explosions or embezzlements. But as for the journalistic cluckings that greeted the Humpty-Dumpty performance (from $68.75 to $25.88 a share) of Oxford Health Plans in Nasdaq trading Oct. 27, those I could have drafted myself. "Some economists have begun to question whether, over the longer term, health maintenance organizations can deliver on their promise of keeping health costs under control," said the New York Times. Chimed the Wall Street Journal: "The entire HMO industry is struggling with ... public concerns over whether managed care companies are denying needed care to patients to hold down costs."

I soon realized that, far from making our issue obsolete, the Oxford stock plunge and the comments it engendered (despite that company's special circumstances) actually made Dr. Ellwood's remarks more pertinent than ever. He is saying, after all, not that everything is rosy, but that pressures now facing the HMO industry will push it in the direction of true quality competition, increasing its reliance on primary care physicians.